Is Tiebout competition draining people out of California? That theory suggests that people vote with their feet, but its existence in the real world has been questioned. This study from the Manhattan Institute makes for some compelling reading about that real world during the last ten or fifteen years.
Foreign migration remained a net positive for California, in every sense of the word. However, this trend masked the out-migration of domestic residents to other U.S. states, which looks like it averaged 200,000 people a year for the last 20 years.
Sovereign entities are a collection of economic institutions which compete against others in a race for prosperity. A real-world collection of institutions can be thought of as an economic supermodel (in contrast with theoretical models). So when one nation prospers while another fails, we should pay close attention to that supermodel’s features.
The same logic applies to the 50 “laboratories of democracy” known as states. Steve Malanga suggests that the Wisconsin supermodel has lessons for California:
Californians should understand those fiscal pressures. Average annual pay for a local government employee in the state rose by 60%, to $61,185 (excluding benefits), between 1999 and 2008, according to the Little Hoover Commission on California State Government Organization and Economy. That’s about 70% more than the increase in private sector wages in the state over the same period. Average pay for cops and firefighters climbed 69%, to $89,056, again excluding benefits, in the same period. Benefit costs have soared even more than wages. The annual cost of funding pensions in California’s 20 largest municipalities has grown from $1.3 billion in 1999 to $5.1 billion last year, according to a study by Stanford University professor Joe Nation. That’s an annual growth rate of better than 11%.
Faced with such increases, municipalities in California haven’t had nearly the flexibility to mend their budgets that officials in Wisconsin have.
The link is here http://www.latimes.com/news/opinion/commentary/la-oe-malanga-wisconsin-california-bankruptcies-20120717,0,5879241.story